Mr. KEOGH. I got the same impression, so I am delighted that you share my views.

Now, some of the questioning this morning has directed in support of claims that have been made here and elsewhere to the effect that when other countries impose tariffs or take some other action adverse to our interests, we do not insist that they give us compensation where such redress is in order.

I wonder if you would care to comment on those claims?

Mr. BALL. I said a moment ago, Mr. Keogh, that I had come into the State Department from a career in private business, private enterprise, as a professional lawyer.

Mr. KEOGH. And a distinguished one, may I interpolate.

Mr. BALL. Thank you, sir. And that I came in with a very serious intention of trying to ascertain for myself the truth of the opinion which prevailed and which I frequently heard expressed in many industrial quarters that the U.S. Government negotiators had not gotten full reciprocity in the past and that we had suffered a disadvantage as a result of these negotiations.

I have concluded for myself on the basis of the examination that we made of this problem that we have gotten substantial reciprocity in the past, that the negotiations have on the whole been beneficial to the interests of the United States and that a great deal of diligence and effort and vigor have been exercised by our negotiators in bringing this about.

Mr. KEOGH. We have also heard, to a degree which to me, approached ad nauseam, that we are consistently outnegotiated and outtraded and that we get the short end of every trading session we have with foreign countries.

I wonder if you share those views?

Mr. BALL. I may say, Mr. Keogh, that this is a view that I have heard expressed in every industrial community in the world, the feeling that its own government has been outtraded by the other. The view that prevails in Europe to a very considerable extent is that the United States has succeeded in getting the better of Europe and that they have always given away more than they granted.

There is a strong and rather bitterly held view in some European industrial quarters today that the Geneva negotiations represented enormous concessions on behalf of Europe for which they did not receive reciprocity. I think it is a perfectly normal kind of reaction.

I do not think, however, that any charge of the United States not obtaining reciprocity in past tariff negotiations can be substantiated under critical fairminded test. As I say, in an attempt to be objective about this, I have been quite preoccupied to try to get at the truth of it.

Mr. KEOGH. I do recall we had some references to complaints on the part of foreign manufacturers that you referred to. In fact I made reference to some complaints on the part of West German machine-tool manufacturers about U.S. machine tools. Also, we heard about complaints about U.S. imports into Japan by some Japanese manufacturers.

I suspect this all might be indicative of an attempt to becloud and fuzzy lines of thinking in much the same manner as the basic subject

81843-62-pt. 6-24

of these hearings-tariffs seems in these days to be obscuring the historic line of demarcation between the two major political parties of the country.

Mr. BALL. I would say that certainly the trade has become such an important aspect of an overall policy of any country in relation to the rest of the world that there are all kinds of considerations which necessarily enter into a negotiation.

Mr. KEOGH. And it is becoming increasingly difficult for an individual, a company, or an industry, or in fact a country, to advance or retain a parochial point of view with this ever shrinking world and the consequent complex, intertwined individual, national, and international relationships.

Mr. BALL. I would agree with that very much, Mr. Keogh. I would say that even on the basis of limiting the scrutiny to the purely commercial interests involved, I think that the United States, however, has done very well in its past negotiations.

Mr. KEOGH. There has been some concern expressed before us that our prospects to continue to sell our agricultural product in Western Europe might be affected by the pending bill. I wonder if you have any ideas as to whether this bill would help to solve any problems we might foresee as possible in that area?

Mr. BALL. I think the pending bill quite frankly, sir, is vital to the preservation and development of the market for American farm produce, particularly in Western Europe. This problem for American agriculture would have occurred whether or not the Common Market was created.

I think it will be stimulated, however, by the fact that the Common Market is coming into being, depending on the kind of policies which the Common Market adopts.

The reason I say this is that what is occurring in the world is a technological explosion in agriculture which is almost greater in its implications and in its effect than in industry, so that one farmer is able to grow on the same plot of ground seven or eight times what he grew before. This technological explosion is only beginning to be felt in some of the other markets which have been some of our traditional export markets, so that, when they apply the new technology there, there is a problem of maintaining the position of American agricultural exports to that country.

This is why it is very important to us that the President have the bargaining power to insure that the agricultural policies which are adopted in Europe do not result in the maintenance of such high internal support prices, particularly in the European Common Market, as to encourage the uneconomical development of their indigenous agriculture aided by the new technology, to the point where they begin to produce more and more of their own requirements and import less and less.

Now, this danger will be offset to some extent by the fact that I think one can expect the European consumer to have some change in his food eating habits to shift from direct consumption of cereals to the consumption of meats and proteins and to the extent that this takes place, then the cereal requirement is multiplied by a factor of six or seven. So this will be working as an offset as the level of income rises in Europe.

But it is a very complex problem and I think we have to face it and we have to make sure that the President is armed with the authority which will enable him to defend the position of American agriculture in these markets.

Mr. KEOGH. Finally, Mr. Secretary, it has been said somewhat on a note of desperation that the broad authority here sought, particularly the provisions for adjustment assistance, might be inconsistent with our free enterprise system.

Would you care to comment on that?

Mr. BALL. I would say that the removal or the reduction of restrictions to competition, which is one effect of the lowering of tariffs, is thoroughly consistent with the free enterprise system, that all that is being sought by the trade adjustment program is to provide some temporary transitional measures to assist American industry and agriculture in moving toward a higher level of efficiency in order that they will be more competitive. This seems to me wholly in accord with the advancement and encouragement of the free enterprise system. Mr. KEOGH. Thank you very much, Mr. Secretary.

Mr. KING. Mr. Baker.

Mr. BAKER. Mr. Secretary, do you have before you a copy of a speech which you delivered in Bonn, Germany, on April 27

Mr. BALL. I do not have it in front of me, Mr. Baker, but I think I can recall it. I can recall the speech because I wrote it myself. Mr. BAKER. I am sure you did.

It is a very fine piece of literature. Will you please turn to page 8? If you will do so I would like you to read the third and fourth paragraphs. Then I have one question to ask you.

Mr. BALL. The third paragraph begins "At the present moment." Is that it?

Mr. BAKER. That paragraph and the next one.

Mr. BALL (reading):

At the present moment and until a new law is enacted the President's powers to change U.S. tariffs are based upon the existing Trade Agreements Act. The philosophy and approach of that act are clear: when an American industry is suffering from serious injury that can be attributed to imports, the law provides for the restoration of import restrictions. Under that law the President raised the tariffs on carpets and glass.

This was the only form of relief which the President could provide under existing law. That will no longer be the case if Congress enacts the proposed Trade Expansion Act. That act provides a different approach to the problems of adjustment created by imports. Reflecting the experience of the EEC itself, the act proposes to rely upon domestic adjustments as the first response to such problems. Industries finding difficulty in adjusting to lower tariffs will be given various types of financial and tax aid to enable them to shift to new lines of production; workers will be helped through retraining and by other means. Import restrictions may be resorted to only as an exceptional procedure and then only for a limited period.

Mr. BAKER. Do those two paragraphs in your considered judgment represent the philosophy of H.R. 9900?

Mr. BALL. I would think so, Mr. Baker. Those paragraphs indicate that what we would hope to be able to do under H.R. 9900 is to limit the utilization of escape clause relief by providing an alternative which in our judgment would seem to be in the better interest of the United States.

Mr. BAKER. And carrying that same thought to its logical conclusion and still using your language, "This proposed act relies upon domestic

adjustments as the first response," and then moving on down, "and that import restrictions may be resorted to only as an exceptional procedure and then only for a limited period," I do not regard that as taking that out of context. In other words, the first remedy is the dependence assistance provision, and as the language of the bill itself says, that I have been talking about with several witnesses, that is "extraordinary relief" as to import restrictions.

Mr. BALL. The President, as I recall, has to make a finding that the trade adjustment relief would not be adequate to take care of the particular situation.

Mr. BAKER. That was my point exactly. Under this bill before you go into duties, tariffs or quotas or import restrictions, there must first be a finding that the dependence assistance provisions, or what one of the witnesses referred to as the humane approach, would not solve the problem, then you go to what we used to call the escape clause.

Mr. BALL. That is right. That is covered by section 305(b) of the act.

Mr. BAKER. That is all, Mr. Chairman.

Mr. BALL. This does not mean of course, Mr. Baker, that there would have to be any delay. The finding would be made immediately. The language is "is or would be." You simply have to have a finding which is a finding in the opinion of the President that the adjustment assistance would be inadequate to mitigate substantially such conditions.

Mr. BAKER. Yes. We are thinking the same way, but surely we will agree that that is very substantially different from existing law. I am talking about the approach.

Mr. BALL. I think the approach is different. I think the approach provides an additional measure which the President has not been able to take before, which he can take in this case, which I think in the long run would be highly beneficial to the United States. If we can move toward creating conditions of greater efficiency rather than protecting conditions of real inefficiency, then I think we advance our national interest.

Mr. BAKER. That is all I have.

Mr. KING. Mr. Curtis.

Mr. CURTIS. Who decides efficiency and inefficiency under what you just said, Mr. Ball?

Mr. BALL. The President would make a finding with regard to the adequacy or potential adequacy of the adjustment assistance to mitigate these conditions.

Mr. CURTIS. In other words, what you are saying is that the bureaucratic, political bureaucratic decision replaces that of the private marketplace because the private marketplace is the primary device that we utilize in our society to determine what is efficient and inefficient? Is that right?

Mr. BALL. I would say that the first judgment involved is the judgment of the producer himself. He may or may not be reflecting an adequate appraisal of the private marketplace, but he comes in with a statement that there is going to be substantial adjustment required and that it cannot be made through adjustment assistance. He argues this position and it is seriously considered and then a decision is made either that that is or is not the case.

Mr. CURTIS. But the tariff would permit the private marketplace to still operate, although granted you have protection or whatever it is, but at least it still provides for the private marketplace to make a decision what is efficient and inefficient as opposed to a political bureaucracy.

Mr. BALL. The tariff never permits the private marketplace to make the decision because it insulates the producer.

Mr. CURTIS. Let us not go to extreme cases because I am not trying to illustrate an extreme case at all. I am simply talking about what is presently under the escape clause proceeding, and I regard a tariff as a differential reflecting an economic difference; and if it is inadequately reflecting that difference and under escape clause proceedings this is established, the one way of providing protection-or whatever you want to call it-is through the tariff. We are not going into the exclusion because a tariff can be completely exclusive, but on the other hand we have lots of tariffs and there are a lot of imports over the tariff.

But once you have gone over the tariff, then the private marketplace is functioning. So your decision of whether it is efficient or inefficient rests in the marketplace while this other method of direct subsidy, which is suggested in this bill, of course is- and I am not using this in the way of epithets, I am trying to be descriptive-is the political bureaucracy makes the decision of what industry or business is inefficient and is going to be subsidized, which one is not and is simply going to be taken care of along with its workers by another method; but this is all done through a political operation as opposed to the private marketplace.

Mr. BALL. The tariff itself is a result of a judgment, of a political judgment made.

Mr. CURTIS. That is correct.

Mr. BALL. That a particular industry requires protection which is the result of the judgment of the effect of the particular marketplace on that industry.

Mr. CURTIS. We are discussing the relative merits if we are going to have this kind of protection which is least restrictive of the private marketplace.

I think it is quite clear that the most liberal of all, if you are going to use something from the standpoint of government interfering, is the tariff. I could not agree with you more. It is a political decision when you impose a tariff and at what level you put it. But once that is done, then the marketplace continues to operate while under the quota system it does not-like your textile quotas, freezing the pattern of the market as of 1960 and going back to the 1960 census. What could be more restrictive as far as the balance between the political sector and the private sector?

Mr. BALL. I would certainly agree that, in the field of trade restrictions, tariffs are less restrictive than trade quotas.

Mr. CURTIS. Mr. Secretary, I wonder for one particularly Congressman Baker brought this out, in the light of that, how does the administration reconcile its support of the utilization of and further extension of the powers under section 204 of the Agricultural Act of 1956? That is the authority under which this textile setup has been reached in Geneva.

Mr. BALL. The authority which is sought is the authority in aid of the textile agreement. The textile agreement is in response to a